Rough year for Chicago's Home Sellers

By Mike Comerford
Daily Herald Business Writer

In Economics 101, many of us were taught when supply rises and demand falls, price should fall too.

Such is not the lesson of the 2006 existing home market, as housing inventory rose, sales fell the most in 24 years and yet existing home prices rose.

The question in 2007 is whether the housing market will return to historical norms or continue its 2006 sales recession.

“I think the consensus is we’re at the base right now,” said Steve Hovany, president of Schaumburg-based housing research firm Strategy Planning Associates Inc. “I think by this time next year we’ll be where we should be at in the industry.”

According to figures released Thursday, the Chicago area was hit harder than the nation at large. Home sales fell 12.6 percent for the year in the Chicago market but just 8.4 percent across the country.

Except for DeKalb County, each of the counties surrounding Chicago showed double-digit declines in the number of homes sold, according to the Illinois Association of Realtors.

Nevertheless, housing prices overall rose more than the national median. Prices rose 2.1 percent in the Chicago area compared to a meager 1.1 percent across the country, according to the state and national Realtor associations.

Particularly hard hit were statewide home sales in December, which fell 19 percent, to 10,811 homes.

December home sales in Chicago fell even more, plunging 21.5 percent, to 9,600 homes sold.

Still, Realtors say those numbers need to be put in perspective.

Despite the steep fall-off in sales, last year was still the fourth best on record for total home sales in Illinois, according to the Realtors association.

Sales were fueled by low mortgage rates, with the average rate in December 6.2 percent for a 30-year, fixed-rate home mortgage, close to a 45-year low.

“The Illinois housing market weathered a year of contraction in sales, experienced across the nation, with continued modest but positive price appreciation, which shows the relative market stability of our region,” said Robert Zoretich, president of the Illinois Realtors Association.

Sales are coming off five straight record years. And home prices have risen 12.4 percent since the start of 2005.

Hovany said there’s a general rule about home prices these days.

“The basic wisdom is you have to bring your price down to last year’s level to sell it,” Hovany said. “But many people tend to want to wait it out to get their price.”